The Reserve Bank of Australia will likely raise interest rates just one more time before pausing asand corporate dealmaking, according to Morgan Stanley’s country head.
“I think the consumer is hurting and has already turned,” CEO Richard Wagner told Bloomberg Television on Wednesday. “It takes a few months for those rate rises to drain bank accounts so we’re really talking about a third-quarter phenomenon where the consumer will have adjusted significantly and then we’ll be on pause.”by a quarter-percentage point to 4.1 per cent, the highest level since April 2012, bringing its cumulative tightening to 4 percentage points since May last year.
Wagner said the fact that a number of consumer companies have recently announced earnings downgrades in Australia indicates that households have already “capitulated to the cost of living.”A and ECM because both are confidence-driven activities,” Wagner said, adding companies are focused on their own operations and profitability in this period of uncertainty.
He acknowledged the central bank’s concerns about rising house prices. “But I think they’ll also want to be cautious and go slow, not wanting to effectively destroy the spending power of the consumer.”
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